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№ 306 16 filings · 2024-06-18 → 2026-06-05

RASPBERRY PI HOLDINGS PLC

RPI
Technology Share price 577p Market cap £1.1bn Overall fit 290 /1000

Solid quality and a balance sheet that protects the downside, but only an indirect AI-receiver (edge AI add-ons and royalty crumbs) with moderate hardware operating leverage, and the shares have tripled in six months to a level that already prices in a sustained windfall — the antithesis of valuation discipline for this strategy.

Fair value range 520p–920p Mid case · £1.4bn
Absolute upside +25.4% vs current market cap
Conviction 3/5 confidence in overvalued call
Supports the call
  • Clear, candid management commentary on temporary vs sustainable EBITDA drivers
  • Consistent beats vs consensus since IPO
  • Fortress balance sheet and transparent disclosure
Limits the call
  • Only ~2 years of public reporting; limited cycle history
  • Sustainable EBITDA is sensitive to how one strips out the DRAM windfall
Methodology

Forward EV/EBITDA on normalised earnings, cross-checked vs P/E

In one line · bull case

Smart inventory positioning is turning AI-driven DRAM tightness into a material earnings beat for a fortress-balance-sheet, founder-led embedded-compute platform with growing industrial OEM traction.

In one line · biggest risk

The shares already discount a sustained DRAM windfall that management explicitly says will moderate, leaving valuation priced for perfection at ~50× sustainable EBITDA.

Drivers
AI beneficiary 38 /100
Edge-AI add-ons (AI Kit/Camera/HAT+) are modest; main AI link is a negative input-cost channel via DRAM, partly arbitraged via inventory.
Operating leverage 45 /100
Hardware GMs ~24% cap leverage; modest fixed opex helps but no SaaS-style step-up.
Earnings vs expectations 72 /100
Two consecutive material beats (FY2025 and H1 2026) post-IPO.
Growth momentum 78 /100
Accelerating: FY2025 EBITDA +20%, FY2026 set to be significantly ahead of consensus.
Moat 55 /100
Strong community brand, vertical integration, Arm/Broadcom relationships; limited switching costs in enthusiast tier.
Earnings quality 55 /100
Heavy R&D capitalisation (67%), weak FY2024 cash conversion vs Adj EBITDA, inventory-heavy.
Management quality 72 /100
Founder-led, candid disclosure, smart supply-chain stewardship, well-executed IPO.
Cyclicality 60 /100
Exposed to industrial/embedded cycle and DRAM/component pricing — moderately cyclical.
Leverage 12 /100
Net cash, $80m undrawn RCF to 2029, very low gearing.

Raspberry Pi Holdings plc (RPI) — Investment Research Note

Executive summary

Raspberry Pi designs and sells low-cost, high-performance single-board computers, compute modules and microcontrollers to industrial OEMs (~70% of demand), enthusiasts/education and via a licensee channel, supported by in-house semiconductor IP. The trajectory across the period is one of post-pandemic normalisation: 41% revenue growth in FY2023, a 2% revenue dip and 15% Adj EBITDA decline in FY2024 from channel destocking, then a strong FY2025 recovery (Adj EBITDA ≥$45m, +20%) followed by a powerful H1 2026 beat (Adj EBITDA ≥$38m vs $42m FY consensus) on cheap pre-bought DRAM. The single most important valuation point today is that the shares have ~4× in six months on this DRAM-arbitrage windfall, leaving the stock at roughly 50× sustainable EBITDA — heroic assumptions on AI-adjacent semis multiples are now embedded.

Fair value estimate

  • Methodology: Forward EV/EBITDA (cross-checked against EV/Sales and P/E), centred on a "post-windfall" sustainable EBITDA estimate that strips out the temporary low-cost-DRAM inventory benefit which management itself flags as moderating in H2 2026.
  • Key assumptions:
    • Sustainable run-rate Adj EBITDA $50–65m (above FY2025's $45m, reflecting volume growth and OEM design-wins, but below the H1 2026 windfall-inflated rate). At ~£0.78/$ that's £39–51m.
    • Multiple range 22–32× EBITDA (mid-cap UK tech/semis with growth but cyclical end-markets and ~24% gross margins).
    • Net cash ~£20–25m.
  • Fair value range: ~520p – 920p per share, midpoint ~720p, implying market cap range ~£1,000m – £1,780m, midpoint ~£1,400m.
  • Latest disclosed market cap £2,034m versus midpoint £1,400m → ~31% downside to mid; range −50% to −13% vs the current 1,051p.
  • The bull-case scenario (sustainable $80m EBITDA × 35×) gets to ~£2.2bn or ~1,135p — i.e. you have to assume the windfall persists structurally and the market awards a high-growth semis multiple to just justify the current price.

Sector context

  • Sector: Technology (ICB Tech / Tech Hardware & Equipment). Confirmed — full-stack semiconductor IP + electronic product design + software.
  • Quality/growth/leverage profile is above typical UK industrial-tech peers on balance sheet (net cash, fortress liquidity, $80m undrawn RCF 2025-04 FY2024 results) and on growth momentum, but below pure-play AI infrastructure semis on gross margin (24% vs 50–70% for fabless designers) and on AI revenue exposure.
  • Comparable listed peers: limited direct comps; loosely Arm Holdings (semi IP, ecosystem partner and shareholder), Premier Farnell parent Avnet/Element14 (distributor), and on the embedded compute side Advantech / Kontron AG. None map perfectly.

Investment thesis (3 bullets)

  1. Inventory positioning is converting an industry headwind into a sustained earnings beat. Memory vendors are diverting LPDDR4 capacity to AI data centres, but RPI's long-standing buffer policy plus opportunistic 2025 purchases means H1 2026 Adj EBITDA already approximates the full-year consensus, with FY2026 EBITDA flagged "significantly ahead of current market expectations" 2026-06-05 trading update; 2026-01-13 year-end update.
  2. OEM/Industrial channel strategy is broadening the customer base beyond enthusiasts. Industrial/embedded is ~70% of demand; multi-year SECO strategic partnership signed, Compute Module 5 design wins, growing Approved Reseller network (+13 in 2024), and Connect for Organisations starting to monetise software/services 2025-04-02 FY2024 results; 2025-01-29 trading update.
  3. Balance-sheet fortress + founder-led, vertically integrated R&D. Net cash, $80m undrawn RCF extended to 2029, 67% of R&D capitalised on a rapidly expanding pipeline (RP2350 launched, RP1 deployed, next-gen flagship in development), Arm a strategic shareholder (and £50m participant in April 2026 placing) 2025-04 FY2024; 2026-04-23 secondary placing.

Key risks (3 bullets)

  1. Memory cost normalisation will erase the windfall. Management is explicit that H2 2026 unit economics will moderate as cheap DRAM depletes and the company has to absorb higher input costs; DRAM availability at high densities is constrained by AI capex 2026-06-05 trading update; 2026-01-13 year-end update.
  2. Single-supplier concentration on Broadcom SOC and Sony South Wales manufacturing. Any disruption would directly hit production and revenue; some board-level commentary acknowledges this is mitigated only by inventory buffers and contingency planning 2024-09 H1 2024 interim risks.
  3. Customer concentration in the channel. One major distributor was 27% of FY2024 revenue and the contract manufacturer 14%; channel destock in 2024 illustrated how quickly volumes can swing 2025-04 FY2024 final results, Revenue note.

Operating leverage

RPI's leverage profile is mid-tier hardware — better than a pure box-shifter but capped by ~24% gross margins. The fixed-cost base is modest: in FY2024, adjusted R&D was just $8.7m and adjusted admin $17.3m on $259m revenue, i.e. ~10% of revenue 2025-04 FY2024 results. A 10–20% revenue beat at the prevailing ~24% incremental gross margin would add $6–12m to gross profit; with limited opex creep that drops straight to EBITDA — roughly +15–30% on a ~$45m EBITDA base. The H1 2026 beat illustrates a sharper version of this leverage, but it's working through gross-margin uplift (favourable DRAM inventory), not through fixed-cost dilution — and that is by management's own admission temporary. There is no SaaS-style or platform-economics inflection here: Connect for Organisations has only "first paying subscribers in Q1 2025" and is immaterial today. The leverage is real but the multiple-of-profit kind the investor seeks would require either a step-change in gross margin (semiconductor IP/royalty mix shift) or scale to a much larger fixed cost base.

Value-trap signals

None identified. Growth has resumed (FY2025 EBITDA +20%, H1 2026 materially ahead), no dividend cuts (no dividend policy yet), no guidance misses, balance sheet is fortress, founder is engaged. The opposite signal — priced for perfection — is the live concern, not value-trap risk.

Earnings vs. expectations

Limited public history (IPO June 2024). The pattern observed:

  • H1 2024 (Sept 2024 interim): profit "ahead of internal expectations", though full-year unchanged → modest beat 2024-09 interim.
  • FY2024 (April 2025): Adj EBITDA $37.2m, "in line with guidance" → met 2025-04 FY2024 results.
  • FY2025 (Jan 2026 trading update): Adj EBITDA ≥$45m vs consensus $40.9m → beat by ~10% 2026-01-13.
  • H1 2026 (June 2026 trading update): Adj EBITDA ≥$38m, full-year flagged "significantly ahead" of $42m consensus → material beat / upgrade 2026-06-05. Pattern: consistent beats since IPO, with the most recent two being substantial. However the recent beats are heavily driven by the temporary DRAM inventory tailwind, which limits the read-across to underlying earnings power.

Conviction

3 — moderate.

Anchoring my view (supportive of conviction): clean post-IPO disclosure; founder-led management with credible commentary; explicit guidance on what is temporary (DRAM windfall) vs. sustainable.

Limiting conviction: (a) only two years of public reporting, so a multi-cycle track record is absent; (b) sustainable EBITDA is genuinely hard to pin down — the windfall portion of H1 2026 could be anywhere from $5m to $20m, materially shifting the multiple; (c) the appropriate exit multiple is contestable — peers range from 15× (commodity hardware) to 35×+ (AI-adjacent semis), and the market is currently anchoring to the higher band.

Filings consulted · 16

Every document the LLM read for this note. Click any row to open the source.

  1. 2026-06-05Trading Update2026-06-05_9603039_trading-update.md0.85
  2. 2026-06-04Result OF Agm2026-06-04_9602926_result-of-agm.md0.30
  3. 2026-04-23Results OF Secondary Placing IN Raspberry PI2026-04-23_9533736_results-of-secondary-placing-in-raspberry-pi.md0.70
  4. 2026-04-22Proposed Secondary Placing IN Raspberry PI2026-04-22_9533479_proposed-secondary-placing-in-raspberry-pi.md0.70
  5. 2026-04-21Availability OF Annual Report And Notice OF Agm2026-04-21_9530730_availability-of-annual-report-and-notice-of-agm.md0.95
  6. 2026-01-13Year End Trading Update2026-01-13_9348972_year-end-trading-update.md0.85
  7. 2025-05-23Correction Result OF Agm2025-05-23_8895064_correction-result-of-agm.md0.20
  8. 2025-05-20Result OF Agm2025-05-20_8888128_result-of-agm.md0.20
  9. 2025-04-17Availability OF Annual Report And Notice OF Agm2025-04-17_8837613_availability-of-annual-report-and-notice-of-agm.md0.62
  10. 2025-04-02FY 2024 Final Results2025-04-02_8809266_fy-2024-final-results.md0.65
  11. 2025-02-24Notice OF Investor Presentation2025-02-24_8748382_notice-of-investor-presentation.md0.46
  12. 2025-01-29Trading Update2025-01-29_8710419_trading-update.md0.55
  13. 2024-09-24Interim Results2024-09-24_8434309_interim-results.md0.58
  14. 2024-06-21Disposal OF Shares2024-06-21_8272674_disposal-of-shares.md0.49
  15. 2024-06-21Acquisition OF Shares Replacement2024-06-21_8272910_acquisition-of-shares-replacement.md0.49
  16. 2024-06-18Disposal OF Shares2024-06-18_8265553_disposal-of-shares.md0.49

This research note was authored by a large language model after reading 16 regulatory filings published between 2024-06-18 and 2026-06-05. Each citation refers to a specific RNS announcement in the underlying data set. The note is an opinion, not advice. Do your own work before risking capital.